As an employer, small business owner or self-employed individual, there are a lot of factors that you need to work out to keep the company and/or the business growing. You have to monitor employee’s performance, keep expenses within the budget, and many more more. Another possible source of problems and worry is which type of retirement plan to choose for yourself and for those under you. Of all plans tailored for small business owners and the self-employed, a SEP IRA is probably the best retirement plan you could choose. But does is suit your needs and preferences? Here are 3 common concerns of people choosing their retirement plan:
Do you want a plan that is easy to setup?
A SEP plan is very easy to set up. As an employer, you will be responsible for setting up the SEP by filling up Form 5305-SEP. Employees on the hand are the ones who will open their individual IRA accounts that will fall under the SEP. Both parties must agree to the terms of the SEP.
Are you concerned of contribution rules?
With a SEP, contribution rules are very flexible. In this plan, only employers are allowed to contribute to their employees’ IRAs. All contributions made by the employer cannot be deducted from the employee’s salaries. While this may seem like a loss for the employer, any contribution made is 100% tax deductible.
When I am at retiring age, how will the money be distributed?
In the SEP plan, withdrawals can be done starting age 59 ½ and required distributions start at 70 ½. Any withdrawal done before age 59 ½ is subject to penalties and taxes. Since required distributions start a later time (10 years) compared to other retirement plans, your money has more time to grow until the required distributions start.
even if your moving from one company to be self employed, you can do a rollover 401k into a sep ira.
Inheritance tax planning could be very helpful for your beneficiary to pay little tax on their inheritance. Often people overlook this important aspect and their beneficiaries have to pay excessive taxes. The beneficiary who is named in the legal will is liable to pay inheritance tax. In simple words, inheritance tax is the tax on assets which you have received from the deceased ones. The tax rates involve a number of issues such as your relationship with the deceased, type of the assets and total value of the assets. As a beneficiary, you could claim several reductions on the tax owned on Inheritance. In U.S normally State Government collects inheritance tax. You may find hundreds of books, articles, websites and blogs which are helpful to get a proper understanding about inheritance tax. Many people have shared their real life stories related to inheritance tax in numerous blogs. You may read these stories to make a comparison with your particular case to get a proper understanding and right measures to deal with the situation. Often people do pay huge inheritance taxes which could be easily avoided. The modern technology of internet has made it very simple for you to get all information at the comfort of your home with the help of few mouse clicks. Taking the help of private wealth management advisors is also very effective tool to adopt the right procedure and steps towards reduction of inheritance tax. These wealth management advisors may charge minimal charges about their services. Your chosen advisor would help you in deciding the right you should try to look for the ones, who are reliable and trustworthy. Do a small research before hiring any advisors. You could make a use of major search engines to locate the private wealth advisors operating in your area.
If you plan to go for401K rollover to Roth IRA, the best attitude that you have to possess is the sense of urgency. You have to make a stand on whether you go for this or stick with the traditional IRA. It would be for your best if you make plans right away and not end up with late decisions that will eventually mess things up.
If you plan to Roth IRA, you have to take note that every day counts. Thus, if you drag heels and become so indecisive, you might just realize that your funds are gradually going down the rocks. If you also become so fickle minded and change your mind time to time, you will just find your funds gradually declining due to penalties. Thus, it would really not help you if you keep on changing plans and if you are too late in making your decision.
On the other hand, if you make a decision fast and stand by that decision, you will really save your funds and keep it safe for good. By the time that you finally need to withdraw it, it will be readily available and it has already grown into huge amounts. If you also know the rules when it comes to withdrawal and changing of funds, it will work out to your advantage.
This is where some people fail. They tend not to know the rules and they are not even aware of their responsibilities. Take note that it is your retirement funds that are at stake here. Thus, you have to be overprotective if possible. It will still be for your good at the end of the day.
If you really want to know the details of this concept along with ideas on debt relief, you better check out Free Financial Planning Advice.
Some witty people with a lot money use the Roth IRA account to help them avoid big taxes that they are about to pay every year. This means that, instead of putting the money into the bank, they consider their money as a retirement account because putting it as saving would cost them a lot of money in paying for their taxes. This is because; direct contribution to a Roth IRA may be withdrawn tax-free any time. The Roth IRA or the Roth Individual Retirement Account is a special kind of insurance plan and is under the tax law of the United States. This kind of insurance plan allows you to make non-deductible contributions to save for your retirement, which makes it different from the traditional individual retirement account.
As given, all insurance plans have their own rules since the accounts would have both short-term and long-term tax implications. That is why, the Internal Revenue Service gave rules in order to eliminate probable abuses of the insurance plans. The general Roth IRA rules includes eligibility rules, contribution rules, transfer rules, and distribution and withdrawal rules. Each of the category of rules play an important purpose and function in the Roth IRA rules.
If you plan to withdraw money form your insurance plan, it is most important to know the Roth IRA contribution rules or withdrawal rules. Actually there a few things to consider in the Roth IRA withdrawal rules according to the event of retirement. If you plan to withdraw during the retirement, you must have reached the age of 59 ½ and must have opened your Roth IRA account for at least five years. If so, your withdrawal would be tax-free which is the most beneficial advantage you can get in Roth IRA. On the other hand, if you withdraw your money prior to retirement, the Roth IRA withdrawal rules states that not meeting the Roth five-year-rule but is in the age of 59 ½ and up, it’ll be quite sure that you can avail the same tax exemptions on your withdrawal.
Therefore, it is better if you try to be familiar with the every rule of the Roth IRA so that you can avail the most beneficial advantage, which is tax exemption, in this kind of account and avoid additional tax penalties.
Avoid taxes: Put your riskiest investments in your Roth IRA (usatoday.com)
IRA accounts really offer great benefits. It allows you to save up money for your retirement. You can also invest your money on stocks and certificates and mutual funds. The best part is that the earnings from these investments are deferred form tax. The usual tax that is required in common accounts may accumulate and could make a great financial statement. This accumulation of capital gains and other earnings allows the IRA account holder to save up more money than those having regular accounts. Because of these benefits, it is very appealing to start an IRA account immediately.
Opening an IRA account is simple. The hard part is finding the best IRA companies. There are different companies and financial institutions out there that offer all types of IRA plans. But before you start searching for the best IRA companies you first need to decide on what type of IRA would you want. There are eleven types, each having different benefits. Deciding on what type of IRA you need, will help you have a clearer vision of what an IRA plan should be.
Next, scout for companies that offer the type of IRA that you need. Say, if you want a traditional IRA, find companies offering traditional IRAs and compare their rates. Usually, opening an account will cost you a lot of fees. There are fees just for opening the account and those fees used for investing. To minimize or avoid fees for opening an IRA account, you may want to choose a no fee IRA. Companies offering no fee IRA will charge you a minimal amount for opening an IRA account or won’t charge you anything at all. This may sound too good to be true but there are a lot of financial institutions out there who offers no fee IRA. They make their earnings through commissions when you invest your money on stock, bonds, etc.
In finding the best companies, you should not only look for those companies offering low-fee or no fee IRAs but you should also look for companies that would charge you low commission fees for your investments.
Roth vs. 401(k): Where should my money go? (money.cnn.com)
If you’ve been on the edge of considering a specific place to invest your money for your retirement may I make a suggestion? I suggest the Roth IRA because it allows you to pay taxes on your money while you contribute your money up front, then when you go to pull money out, also known as a distribution, you won’t owe a dime in taxes no matter what kind of returns your money makes in the account.
So in this article I’m going to give you the several reason why a Roth will help you out with your taxes in the long run versus going with a traditional IRA account.
When you hit retirement age you tax liability is going to go up, and if you don’t do something now you’ll end up paying for it in your retirement years. The first reason your taxes will increase is because your kids will have grown up and moved on with their lives. This means the $1000 tax deduction you were getting for each dependent child will no longer be benefiting you. For example if you have 3 kids, this means you would not have to pay taxes on $3000 of earned income.
Second, since you retired you won’t be making a any contributions to you companies retirement program such a 401k. With a 401k program your money is not taxed until you take a withdrawal from it. So every dollar that you put in will be money you won’t have taxed upfront.
Third and finally, when you retire most of your debts will be paid off including your mortgage. This means that the interest payments that you were getting a deduction on in your taxes will no longer be their. For example if you paid $3000 in interest to the bank that would be $3000 you would not owe taxes on as well, but when your home is paid off you won’t get this benefit anymore.
In the end in whether you pick a safe investment or a risky investment follow the Roth IRA advice I’ve given you here and you’ll have a less likely chance of getting hit up with a higher tax bill in the end.